Kathryn Bruns, CPA
Deductibility of expenses paid with PPP forgiven loan funds
I've been getting pretty burnt out on following the ever changing COVID-19 relief provisions, but still plan to report what I feel are the more important ones.
For those who have managed to secure some PPP funds, you almost certainly know that if you prove that you have spent the funds on the "right" things over the 8 weeks following your receipt of the money, the loan will be forgiven and the funds deemed "not taxable". What is now the subject of controversy, is the recent IRS statement that the expenses you pay with these "not taxable" funds, will not be deductible. Although I understand the IRS position, in that theoretically and normally, you cannot deduct expenses paid on income that is not taxed. However, the PPP loans are not dealing with a normal and traditional situation, and not allowing the deductions serves to reduce the aid given to businesses that need it, effectively allowing the IRS to get back some of it via taxes.
Thankfully, a bill has been introduced (and supported by the AICPA) that would overturn the IRS' position on this. So, the rushed-written program problems continue and likely will for months to come. As before, keep in mind that the relief provisions are ever changing and if you are involved you must stay up-to-date on how you may be impacted, seeking help and second opinions as needed.
Stay safe and sane !